Bitcoin quickly plunged below $ 4,000 early in the morning on Friday.
Cryptocurrencies are currently trading near $ 5,741, up about 40% from a low of $ 3,867 at 9am this morning (Vietnam time). That is the lowest level since March 25, 2019.
The stock market is also flashing blue in parallel with the slight recovery of Bitcoin.
The S&P 500 futures are now up more than 3%, while the Euro Stoxx Euro benchmark 50 benchmark has increased by more than 2%.
Asian markets opened lower after losing overnight on Wall Street, but recovered a large portion before closing.
Loss from the beginning of the year until now
While Bitcoin is recovering impressively, the cryptocurrency is still down more than $ 2,000 from nearly $ 8,000 at the beginning of Thursday.
Bitcoin is currently reporting a 27% loss so far this year after rising 46% just a month ago to a trade of nearly $ 10,500.
Earlier, Bitcoin was outperforming gold thanks to the notable margin, when gold increased 6% in 2020. However, since March 13, gold has returned to its peak with a 7.5% annual increase.
The annual profit fell when BTC plunged nearly 39% on Thursday in a relentless sell-off due to Corona virus, which led to many selling off of other risky assets. The result was a huge liquidity crisis (forced liquidation) on prominent exchanges such as BitMEX.
Price increase adjustment?
Bitcoin collapsed unexpectedly from $ 8,000 to $ 3,867 which seemed overwhelming according to technical studies.
Co-founder and partner Jason A. Williams at Morgan Creek Digital tweeted today:
“The latest Bitcoin correction has pushed #BTC to oversold levels last seen in late Sep. 2019 and Nov. 2018. ”
– Jason A. Williams 🦍 (@JWilliamsFstmed) March 12, 2020
“Move The latest adjustment has pushed BTC come excessive sales were last seen in September 2019 and November 2018. ”
Indeed, the RSI ranges from 0 to 100, having dropped to 15 – the lowest level since November 2018. An index below 30 indicates that cryptocurrencies have been over sold.
Therefore, the price increase in the past few hours may have been an “oversold price increase”, which occurred when investors considered the previous sell-off was too serious and reduced selling pressure by easing short position.
Focus on risk psychology
Mike Alfred, co-founder and CEO of Digital Assets Data said:
“Bitcoin will regain equilibrium with risky assets, beginning a sustainable recovery after there is stability in the curve infection Corona virus ”.
According to news The latest Corona virus continues to spread in Europe and the US. Therefore, the current uptrend in the stock market could be a chart-based recovery or investors who are satisfied with Federal Reserve's decision to inject $ 1.4 trillion in liquidity into the system. finance.
If the recovery move gathers momentum in U.S. trading hours, Bitcoin is likely to trade over $ 6,000 again.
However, until the virus outbreak showed no sign of slowing down, the risk of further declines of stock and Bitcoin remained high.
However, according to Alfred, the drop below $ 5,000 will be temporary because there are too many underlying indices from long-term holders or investors who bought Bitcoin before the massive price increase from $ 6,000 to $ 20,000 in the fourth quarter of 2017 and in five weeks of 2018.
Currently, there are 12.19 million addresses that have purchased coins under $ 5,700, according to blockchain intelligence firm IntoTheBlock.
These players can increase their exposure when the price drops below $ 5,000, especially in anticipation of halving miner's rewards (cutting Bitcoin supply) over the next 2 months.
Alfred said the price from $ 2,500 to $ 5,000 brings incredible value to investors.
Has formed a bottom?
The bear market that started in late 2013 has run out of steam at the 200-week moving average (MA) in 2015. Previously, the average was set at nearly $ 220.
The sell-off from a record high of $ 20,000 reached in December 2017 also ended at the MA 200 week in December 2018.
The lower long wick attached to the current weekly candle shows the exhaustion of the seller below MA 200 weeks. If history repeats itself, Bitcoin seems to have found a bottom below $ 4,000.
That doesn't necessarily mean a V-shaped restoration to $ 10,000. If the stock continues to sell off, the price of BTC will return to below $ 5,000.
Antonopoulos: BTC investors don't realize the potential for collapse
Speaking above podcast What Bitcoin Did on January 3, the impact of the recession or similar event did not surprise Andreas Antonopoulos. He explained:
“Most people don't realize at least from the outset that crypto will collapse catastrophically. And the reason it will collapse is because of a lot of venture capital, corporate investment and private investment from easily-cash-based individuals, disposable income and excess cash in the name. investment, … as in any other part of the economy will run out. “
That scenario forecast the excitement of the market this week to reach a strange level. After some of the markets saw their worst day since 1987, Bitcoin has dropped 60% to a low of about $ 3,600 on some exchanges.
While commentators scrambled to explain this phenomenon, Antonopoulos also drew up a scenario:
“When people are scared, when there's such a recession, they pull back investments and also do the same thing with electronic money ”.
Bitcoin derivative transaction volume increase mutation on 12/3 | Source: Skew.com
Extraordinary moments of the economy
He noted that Bitcoin alone in January needed about $ 18 million in purchases per day just to keep the same price.
“From that point of view, I think the first order effect that occurs if a recession is a cryptocurrency problem is because all liquidity is exhausted.. A.It is the classic effect and is signal of recession ”.
After that, Bitcoin has the opportunity to emerge as a safe haven asset, but it is relatively difficult to access and store for non-technical investors, creating a barrier for acceptance and stability. price.
“All that really is signal of having a small lifeboat but very much people in need OK assist”.
BTC / USD managed to compensate for the monumental loss yesterday, but at this point the price of transactions is still down 4.41% in 24 hours.
You can see the price of BTC here.
Disclaimer: This is not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.
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